Capital Economics: Rising oil prices increase costs for Japanese companies, but price caps come with risks

(1) Capital Economics maintains its baseline forecast, believing that although rising crude oil prices will increase costs for Japanese companies, the overall economic impact should remain limited due to the Japanese government's price caps on gasoline and petroleum products. (2) However, Japan remains highly dependent on Middle Eastern petroleum products, especially naphtha—more than half of its consumption relies on imports. Marcel Thieliant, Head of Asia-Pacific at Capital Economics, pointed out that if naphtha shortages worsen, reduced production of plastic products could disrupt broader supply chains. (3) In addition, Japanese manufacturers may also face the risk of weak sales in the Middle East due to difficulties in shipping goods to the region, with the automotive industry being particularly vulnerable.